Baidu Buys Nuomi From Renren; Launchs New App Strategy To Make Consumers Stick

By Shuli Ren

It is now official: Baidu is paying $160 million for 59% of Nuomi, which in theory would be valued at $272 million.

Just like U.S., China’s Internet sector is changing. Though Baidu owns more than 70% of the PC search market, consumers are increasingly using smartphones and native apps to access the Internet.

Baidu does not have a strong group buy presence. Folding in Nuomi gives the company a better platform to launch LBS (location-based services) with its map.

In July, Baidu bought app store 91 Wireless for $1.9 billion, its biggest acquisition. The company says it now has the largest app store in China.

But Baidu behaves like it did not buy the app store at all. At the BaiduWorld conference yesterday, the company launched a new “Light App” strategy. Morgan Stanley analysts Philip Wan, Timothy Chan, and Gillian Chung explain:

We came away more positive on Baidu’s outlook for mobile Internet after Baidu introduced its ‘Light App’ strategy, which facilitates the distribution of long-tail mobile apps, complementing the current native app distribution via app store.

Baidu’s CEO Mr. Robin Li, pointed out that the app store model is fundamentally flawed, because it is only effective in distributing top-ranked apps. Long-tail apps hardly benefit from the search function offered by app stores – users may not know the name of apps. Besides, poor user targeting means that ~ 60% of the downloaded apps are not being used within one week.

Baidu’s mobile app (~130mn daily active users) may become a powerful distribution platform by integrating long-tail apps in the form of light app.

In other words, the easier it is for users to explore and find new apps, the more time they spend on Baidu’s platform. Baidu claims by now they have 70% of the mobile search market.

Morgan Stanley has a Buy rating on Baidu, which has gained 39% this year.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. The Barrons.com Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools.